Imagine that a gigantic corporation privately informs the government that it won an important deal overseas that might have involved the bribery of foreign officials. Journalists discover a confidential document written by the company itself that highlights its concerns. But they can't write about the story because the corporation hires a white shoe law firm that threatens legal action against media outlets that make inquiries about the document.
That's the scenario playing out now around a company called Eurasian Natural Resources Corporation, or ENRC, of Kazakhstan, whose founding shareholders are three oligarchs close to that country's despotic leader. With the help of right-wing Israeli businessman Dan Gertler, it won control of a vast mining concession in the Democratic Republic of the Congo, one of the world's most corrupt, resource-cursed failed states. Gertler is known for his friendly ties to the Congo's president, Joseph Kabila.
Gertler has also worked closely in Congo with Glencore, the Swiss-based commodities and mining giant founded by American businessman Marc Rich, who fled the U.S. in 1983 just before the Justice Department issued an indictment against him on charges of racketeering and illegal trading with Iran. Rich, who is no longer affiliated with Glencore, spent years on the FBI's Most Wanted List before receiving a controversial pardon by President Bill Clinton on the latter's last day in office.
100 Reporters has obtained a confidential British government document showing that ENRC believes that Gertler sold it a concession in Congo that the Israeli might have paid bribes to acquire. ENRC has threatened legal action against at least three British and American media outlets that have obtained the document, demanding not only that they refrain from publishing it but that they return it to the company as well.
Thus far only Africa Confidential, a small but influential newsletter, has published a story about the document, but it withdrew it from the web after a threat of legal action by Jones Day, a law firm retained by ENRC. "ENRC had wanted a court order to compel us to reveal the name of our source," the newsletter's editor, Patrick Smith, told 100Reporters. "Obviously, we couldn't comply with that and would appeal any judgment that went against us."
ENRC and Glencore trade on the London stock exchange and are part of the FTSE 100, the rough equivalent of the Dow Jones Index. ENRC's current market cap is about $9.1 billion.
Members of the British parliament are calling for an investigation into Gertler's Congo deals and his ties to London-listed companies. One of them, Pauline Latham, said Wednesday that it was necessary "to get to the bottom of who is benefiting from these deals – are London listed firms using Dan Gertler and shell companies to navigate around anti-bribery legislation?"
Gertler, the grandson of an Israeli diamond magnate, arrived in Congo in 1997 when he was in his early-twenties. This was just as a horrific war was beginning in the country that left at least 4 million dead. Almost as soon as he arrived, Gertler began establishing close contacts with the government and today is a personal friend of President Joseph Kabila. Gertler was also extremely tight with Augustin Katumba Mwanke, whom a December 2009 US diplomatic cable referred to as Kabila's "Alleged Treasurer and Enforcer." According to the cable, Katumba – who died in a plane crash in February – "is viewed by many as a kind of shady, even nefarious figure within Kabila's inner circle" and "is believed to manage much of Kabila's personal fortune."
In 2002, Kabila sent Gertler to Washington, where he met with top officials, including Jendayi Frazer, who was responsible for Africa on the National Security Council. According to an article in the Israeli daily Ha'aretz, Gertler and a traveling companion asked Frazer to help Kabila by trying to get advocacy groups to reduce their complaints about his government's human rights record. The following year President George Bush hosted Kabila in the White House.
Gertler's Congolese interests include diamonds, copper, cobalt and safari parks. Some suspect that his close ties to government officials have helped him win many of the lucrative deals he has landed in recent years. For example, a British parliamentarian released documents late last year that showed the Congolese government had secretly sold billions of dollars of mining assets to British Virgin Islands-registered shell companies, several which are linked to Gertler.
In 2010, the government of Congo took control of a giant copper mine called Kolwezi away from First Quantum Minerals, its Canadian owner, saying it suspected the firm of "wide-scale misconduct". Most observers viewed the takeover as emblematic of the lack of rule of law in Congo; the Financial Times said that First Quantum had been "stripped systematically of all its assets in the country."
A report on the deal by London-based Numis Securities Limited said of First Quantum, "We believe that the company has been the victim of a classic shakedown, simply because it refused to play the 'brown envelope game.'"
Kabila's government sold First Quantum's stake to offshore companies linked to Gertler for $60 million. Shortly afterward, Gertler flipped 50.5 percent of that stake to ENRC for $175 million, throwing in some of his lesser Congolese assets. (Contract documents seen by 100Reporters show that ENRC loaned Gertler the $60 million, so it appears he didn't risk a penny of his own money on the deal.)
First Quantum sued the ENRC subsidiaries involved in the deal for inducement to breach of contract, and for interfering in First Quantum's property rights. Its suit noted that ENRC had received the stake on the same day that First Quantum lost it, and that ENRC had agreed to indemnify the Congolese government and cover its legal fees in any subsequent lawsuit. In a statement at the time, First Quantum also noted that the takeover put an abrupt stop to its social welfare projects in Congo, including a hospital, and treatment programs for HIV-AIDS and malaria.
Earlier this year ENRC agreed to pay the Canadian company $1.25 billion to settle the claim, but it has never acknowledged any wrongdoing in connection with its acquisition of the Kolwezi mine.
The document sent to British authorities, however, disclosed various warning signs of corruption involving Gertler and his Highwind Group, one of his offshore firms that handled the Kolwezi deal. The document was written by an attorney at Herbert Smith, a firm then representing ENRC, and sent in August 2010 to Britain's Serious Organised Crime Agency.
It described the allegations as unproven, but said they could not be entirely dismissed, and they raised the possibility that Highwind may have obtained assets through corruption. The ensuing purchase by ENRC, the document disclosed, could involve criminal property and the payment of illegal bribes to public officials.
Shortly thereafter ENRC concluded its acquisition of Kolwezi anyway. In the year following the deal, ENRC forced out three directors who had expressed concerns about the company's record of corporate governance.
ENRC has retained the law firm of Jones Day and has been threatening journalists who have obtained its report disclosing the suspected corruption behind its stake in the Kolwezi mine. The firm claims that the document was intended to be confidential and journalists must not only refrain from reporting it, but must return all copies to ENRC as well.
Glencore declined comment for this story. Gertler's PR man in London, Shimon Cohen, promised to reply to questions but never did. Daniel Hennis of Jones Day said last wek that he was consulting with ENRC and hoped "to be able to respond to you shortly." He never sent further word.
The parliamentarian Latham said the British government should cut off aid to the Congo sent via the International Monetary Fund until the deals have been fully investigated. "The integrity of the UK's aid program and the work of the IMF are at stake here," she said. " It cannot be right that, in the face of such overwhelming evidence of wrongdoing, the UK Government does nothing. There is little point in pumping money into a DRC Government that is stealing its own natural resources through a network of shell companies housed in the British Virgin Islands."
The U.S. is also a major donor to Congo, providing some $213 million in non-military aid in 2011. Some congressional offices with knowledge of the Gertler deals have privately expressed concern about American aid to Kabila's government and the role of the IMF.